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EUR/USD AUD/USD Weekly Forecast 1 Apr 19

In our previous weekly review, we noted that the AUD/USD weekly chart was flat. It failed to establish a hold above 0.71. As the currency pair was mostly sideways, we expected the usual technical regions to provide influence. The lower and middle bollinger bands were to function as immediate support and resistance. The 0.7 and 0.71 region would also provide sentiment induced reactions. For the EUR/USD, it was bearish for the week. Similarly with the current price action mostly sideways, we expected the lower and middle bollinger bands to be the immediate support and resistance regions. The sentiment regions of 1.12 and 1.14 would likely be the second level of support and resistance.

AUD/USD Technical Analysis

Looking at the AUD/USD weekly chart above, we note that the currency pair was almost flat with a little tilt to the upside. The middle bollinger functioned as expected and capped the bullish drive for now. We often profess our love for bollinger bands and this is a conclusion after a decade of observation. Our propriety Price Action Bias Signals includes bollinger bands as one of the key analysis.

In the week ahead, we expect the immediate support and resistance to be the sentiment region of  0.7  and middle bollinger band respectively. The sentiment region of 0.72 will be the extended resistance while the lower bollinger band will likely provide uplift for downside pressure.

EUR/USD Technical Analysis

Looking at the EUR/USD weekly chart above, we observe a down side push towards 1.12. We mentioned previously that the multiple attempts to push below 1.12 suggests a strong undertone. As more long positions get triggered along 1.12, we may see dwindling support.

In the upcoming week, we should drop down to lower time frames to monitor the currency pair’s reaction to 1.12. Should this strong support finally fail, we may see a trigger of stop losses from investors. This may add to the bearish pressure as the supply of euros will increase due to the closure of long positions. Should the currency pair recover, the immediate resistance will likely be the middle bollinger band, followed by 1.14.

China’s Ups and Downs

It was reported that the Chinese Premier Li spoke of a positive outlook for China in a recent forum. He acknowledged the economic slowdown and mentioned that China is ready with countermeasures. He brought to light of stable and positive economic data such as employment for the first two months of the year. Having said so, it appears that the actual figures may differ as mixed results are being reported. Regardless, he mentioned that China has the tools to support any downturn and that long term development will not be sacrificed for short term goals. He also affirmed that China will not rely on quantitative easing.

As the US China trade discussions continue, there is a certain sense of upbeat vibes reported. While this is much welcomed by the global economy, we need to be ready for any unexpected developments as things may change anytime when it comes to negotiations.

Over the weekend, China reported a better than expected figure for the Manufacturing purchasing managers survey. It came in at 50.5 which indicates industry expansion. The expected number was a contraction at 49.6. Should sentiments ride on this event, we may see bullish uplift, especially for the AUD/USD. China is a major trading partner of Australia.

Failed Euro Recovery

In the beginning of the week, we had positive economic data from the German Ifo Business Climate survey. It came in better than expected but the euphoria gave way to selling pressure as further releases were not as ideal. The German preliminary Consumer Price Index came in at 0.4% instead of 0.6%. As a major contribution to inflation, consumer prices are closely looked at. A weaker than expected figure may lead to decreased demand for the currency as central banks usually raise interest rates in an inflating economy.

Inverted Yield’s Risk Aversion

A major talking point these days are of the feared inverted yield curve. Basically this happens when long term US treasury bonds are yielding lesser than short term ones. Many investors are averse to this as there is a perception that an inverted yield curve suggests the approaching of a recession. For example the yield curve was inverted in 2007 prior to the 2008 financial crisis.  During times of risk aversion, investors seek holdings in “safer” assets such as the US Dollar.

As you can see from this chart of data from our premium analysis, the US Dollar Index is generally on higher grounds in recent months. This adds a small bias for the US dollar in our considerations.

Week Ahead

The week ahead is an important one. There are many significant data to be released.

CNY Caixin Manufacturing PMI
EUR CPI Flash Estimate
EUR Core CPI Flash Estimate
USD Core Retail Sales
USD Retail Sales
USD ISM Manufacturing PMI
AUD Building Approvals
AUD RBA Rate Statement
AUD Cash Rate
AUD Annual Budget Release
USD Core Durable Goods Orders
USD Durable Goods Orders
AUD Retail Sales
AUD Trade Balance
CNY Caixin Services PMI
USD ADP Non-Farm Employment Change
USD ISM Non-Manufacturing PMI
EUR ECB Monetary Policy Meeting Accounts
USD Average Hourly Earnings
USD Non-Farm Employment Change
USD Unemployment Rate

As you can see we are expecting retail sales, trade balance, interest rate decision and employment data. The US Non-Farm Payroll at the end of the week is closely monitored by investors and traders and hence may induce more volatility, especially if the result is unexpected. Members can log in to their dashboard to view how the AUD/USD and EUR/USD reacted to each month’s US Non-Farm Payroll data.

Besides the above, there are many more economic events and hence do follow and monitor with an economic calendar. Members can log in to their dashboard for an economic calendar and the latest analysis, including the Price Action Bias Signals.

Do always practice proper money management.

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